Under legislation introduced by the administration, apartments to be built as part of the "Superblock" project near Lexington and Howard streets would receive a deep discount on property taxes for 20 years.
City officials said it would not be feasible for the developers to build the 269-unit apartment building and 650-space underground garage without a tax incentive. The once-bustling shopping hub is now largely derelict.
"If we want more apartments outside the waterfront, we have to provide other forms of subsidy," said M.J. "Jay" Brodie, president of the quasi-public Baltimore Development Corp. "The city gets a decent return, and the developer is not getting unduly enriched."
But some community leaders said they would fight the tax break, which comes as Rawlings-Blake's proposed budget pares back funding for recreation centers, pools and after-school programs.
"It seems that the city can always find resources for developers of downtown while cutting resources for our children and our neighborhoods," said Bishop Douglas Miles, co-chair of the interfaith activist group Baltimoreans United in Leadership Development.
"It's unfortunate that our mayor and many in the City Council cannot see the injustice in this situation," said Miles, adding that BUILD members plan to rally against the tax break before it is finalized.
Under the deal, the developer, Lexington Square Partners LLC, would pay property taxes on a fraction of the total value of the apartment complex, which would front Fayette Street. The city would tax the building at its current value, plus 5 percent of improvements, for the first 15 years. The rates would steadily rise over the five years after that.
Kathy Robertson, who oversees west-side projects for the development corporation, said the land is now appraised at $12.2 million. The property's assessed value, which would be used to calculate the baseline tax rate, was not immediately available. The property currently belongs to the city and therefore is not charged property taxes.
The planned apartment building is part of a huge — and controversial — redevelopment project, which is the subject of an appeal before the state's highest court. The tax break would cover only the apartments and garage, not retail and office space.
A mayoral spokesman said boosting development on the west side is a key part of Rawlings-Blake's plan to reverse decades of population loss in Baltimore.
"Getting things moving on the west side is an important priority for Mayor Rawlings-Blake and is part of her overall goal of growing the city by 10,000 families over the next decade by encouraging growth and kick-starting stalled projects," Ryan O'Doherty said in an email.
Brodie, the Baltimore Development Corp. head, said boosting development is the best way to turn the city's economy around. City leaders are dealing with the fourth significant budget shortfall in as many years.
"We need to find ways to get more dvelopment that pays more taxes over time," Brodie said. "That's the way out of red ink."
Brodie said the developers plan to charge substantially higher rents than other nearby apartment buildings. He noted that several nearby apartment complexes have received tax subsidies.
According to a report compiled by his group last year, five west-side apartment buildings benefit from tax breaks: Centerpoint, Camden Courts, Redwood Tower, St. James Place and the Zenith. The city rebated a total of $2.49 million in property taxes to the five buildings' owners last year, according to the report.
The buildings receive the same subsidy the city hopes to apply to the new apartments; their owners make an annual payment in lieu of taxes, or PILOT. The terms of the PILOT deals for the nearby apartment buildings range from 15 to 20 years.
The tax break will get a hearing before the council's taxation and finance committee before it could go to the full body for a final vote. The chair of that committee, Councilman Carl Stokes, has been a fierce critic of tax incentives.
Baltimore Sun reporter Lorraine Mirabella contributed to this article.